A:
a. discount rate.
b. tax rate.
c. inflation rate.
d. riskfree rate of return.
Answer: C
Since the real rate of return measures the investor's rate of return in excess of the inflation rate.
RELATED FAQS

At yearend 2004, the Federal Reserve reported moderate economic growth of 3% ... ...
The correct answer is c). The real interest rate, also referred to as the inflationadjusted return, factors the eroding ... Read Answer >> 
What is the difference between real and nominal interest rates?
Learn what nominal interest rates and real interest rates are, how real interest rate takes into account the inflation rate, ... Read Answer >> 
How is the expected market return determined when calculating market risk premium?
Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >> 
What can cause the rate of return to be negative?
Learn how poor company or sector performance, economic turmoil and inflation can cause the rate of return on an investment ... Read Answer >> 
How is the riskfree rate of interest used to calculate other types of interest rates ...
Learn how the riskfree rate is used to compare the yields on bonds, and understand how Tbills are used as a proxy for the ... Read Answer >> 
What two components are used to calculate riskadjusted return? I ...
The correct answer is b. Standard deviation and the riskfree rate of return are used to calculate or measure return based ... Read Answer >>
Related Articles

Markets
What's a Real Rate of Return?
A real rate of return is an annual percentage investment return thatâ€™s adjusted for inflation, taxes or other factors. 
Managing Wealth
How Interest Rates Affect Property Values
Along with their impact on mortgages, interest rates affect capital flows, the supply and demand for capital, and an investorâ€™s required rate of return. 
Managing Wealth
More Ways to Evaluate Portfolio Performance
The Jensen measure is another tool investors use to include risk when measuring portfolio performance. 
Managing Wealth
What Investors Should Know About Interest Rates
Understanding interest rates helps you answer the fundamental question of where to put your money. 
Managing Wealth
How Interest Rates Affect Property Values
When interest rates fall, real estate prices tend to increase. Why? Find out here. 
Markets
Understanding Interest Rates: Nominal, Real And Effective
Interest rates can be broken down into several subcategories that incorporate various factors such as inflation. Smart investors know to look beyond the nominal or coupon rate of a bond or loan ... 
Retirement
Retirement Planning: Why Real Rates of Return Matter Most
Here's how to plot your real rate of return, understand your "personal inflation rate" and safeguard your retirement funds against inflation. 
Managing Wealth
Measure Your Portfolio's Performance
Learn three ratios that will help you evaluate your investment returns. 
Managing Wealth
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth. 
Trading
How to Calculate Required Rate of Return
The required rate of return is used by investors and corporations to evaluate investments. Find out how to calculate it.
RELATED TERMS

RiskFree Return
The theoretical rate of return attributed to an investment with ... 
InflationProtected Security  IPS
A type of fixedincome investment that guarantees a real rate ... 
RiskFree Rate Of Return
The theoretical rate of return of an investment with zero risk. ... 
AfterTax Real Rate Of Return
The actual financial benefit of an investment after accounting ... 
Real Interest Rate
An interest rate that has been adjusted to remove the effects ... 
Timeliness
A proprietary rating system used to rate stocks while taking ...